Interactive Brokers headache after moving to the USA

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Runner3891
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Joined: Sun Mar 07, 2021 3:16 am

Interactive Brokers headache after moving to the USA

Post by Runner3891 »

I'm hoping someone can provide a solution for a complex problem that my wife is having after opening a brokerage account with Interactive Brokers while abroad. First some background- I'm an American citizen who is married to a legal permanent resident (my wife is originally from Colombia, has her green card and is on track to become a US citizen in approximately 2 years) and we reside in the Chicago area. We are both school teachers (most recently working in an international school in Vietnam) but moved to the US last year (Me returning and her living here for the first time) and now both work in the public schools.

While in Vietnam, my wife opened an Interactive Brokers account and added steadily into VWRA (all-world ETF) and AGGG (global bonds), which I have come to learn are considered PFICs (passive foreign investments) here in the US. We both figured it would be easy to transfer her I.B. accounts to Vanguard or another U.S. based brokerage after arriving in the US, or at least liquidate the accounts (with possible tax consequences) but she is finding it incredibly difficult. Apparently, it would have been much easier if she would have liquidated her I.B. accounts while abroad before she acquired US residency, but neither of us had any idea about this. When she arrived in the U.S., she opened a Vanguard brokerage account with no issues, however, she cannot transfer or even sell any of her current I.B. accounts. Interactive Brokers has essentially frozen her accounts and when she tries, she get a message on the I.B. platform that reads, "Restricted: US residents may not open positions in this contract." She's tried to contact I.B. customer service multiple times- by sending tickets (all unanswered), emails, chat, and calling (can't get anyone to pick up), with no success.

We're going to continue trying to get guidance from I.B., but we were wondering if anyone has any guidance on how best to navigate this issue? Also, since my wife arrived in the US last year and started working, she'll be filing US taxes for the first time (or I should say we'll be filing as "Married filing jointly") and I am wondering if it is best to wait until this I.B. investment headache is worked out before filing taxes? I would appreciate any feedback or suggestions.

Thank you in advance!
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typical.investor
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Re: Interactive Brokers headache after moving to the USA

Post by typical.investor »

Runner3891 wrote: Mon Feb 03, 2025 11:45 am however, she cannot transfer or even sell any of her current I.B. accounts. Interactive Brokers has essentially frozen her accounts and when she tries, she get a message on the I.B. platform that reads, "Restricted: US residents may not open positions in this contract." She's tried to contact I.B. customer service multiple times- by sending tickets (all unanswered), emails, chat, and calling (can't get anyone to pick up), with no success.
Did you ask Vanguard to transfer the account (and specify to liquidate all positions)? That will have a tax consequence of course, but you want to get out of PFIC funds for sure.

I can understand IBKR restricting access since US people will complain if they aren't aware of PFIC and end up buying something that isn't good for them, but I don't understand them not responding. That's not completely unexpected from IBKR though at least in my experience.

Maybe a clear message like "I moved to the US and want to liquidate my holdings and transfer the money to a US account" which tells them what to do instead of, I would guess, asking them why or to explain what is happening which in many cases of account freezing isn't possible due the the secretive nature of investigations.

But I am not really sure what is happening here. Please post any progress you make! Thanks.
AlohaJoe
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Re: Interactive Brokers headache after moving to the USA

Post by AlohaJoe »

typical.investor wrote: Mon Feb 03, 2025 8:43 pm Did you ask Vanguard to transfer the account (and specify to liquidate all positions)? That will have a tax consequence of course, but you want to get out of PFIC funds for sure.
I would be a little surprised if Vanguard (US) has any idea how to transfer something that isn't in the (US) National Securities Clearing Corporation. They would need to know how to transfer securities in other random legal jurisdictions. And asking Vanguard to liquidate it means selling the securities on some non-US exchange, which again, feels like something Vanguard (US) wouldn't really be set up to do. I know technically Vanguard has trading desks that can handle all of that, after all, their international funds are buying things all over, but that doesn't mean it is exposed/available to the retail brokerage account management side of things.

To the OP, in the past when I've run into similar "you are in the wrong country for X" things (not with IBKR, though) I've resorted to asking a friend/family member to use their address. IBKR doesn't even ever mail anything really, so the address isn't used for anything except establishing residency. So you could re-establish (fake) residency in Vietnam, sell the positions, then change it back to the US. This forum, for good reasons, doesn't encourage discussion of illegal/unethical things so I'll just leave it there and feel free to PM me with any questions. I lived in Vietnam for a decade and set up my IBKR account while I was there. (Did you work at BIS or ISHCMC?)
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typical.investor
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Re: Interactive Brokers headache after moving to the USA

Post by typical.investor »

AlohaJoe wrote: Mon Feb 03, 2025 9:00 pm
typical.investor wrote: Mon Feb 03, 2025 8:43 pm Did you ask Vanguard to transfer the account (and specify to liquidate all positions)? That will have a tax consequence of course, but you want to get out of PFIC funds for sure.
I would be a little surprised if Vanguard (US) has any idea how to transfer something that isn't in the (US) National Securities Clearing Corporation. They would need to know how to transfer securities in other random legal jurisdictions.
Well we are talking cash, but Vanguard does have a form to transfer foreign securities. https://personal1.vanguard.com/forms/v8 ... 2210198602
There isn't an option to liquidate and transfer cash though, and Vanguard may not be able to liquidate foreign funds so maybe they wouldn't accept them.

IBKR does have an online Account Transfer tool. https://www.ibkrguides.com/clientportal ... ansfer.htm. Perhaps the wife could open a US account and transfer assets there? At that point, a request from Vanguard to transfer cash from the US IBKR account should work.

Another option might be Schwab Global. Schwab Global is for US people who wish to trade on foreign exchanges. (But actually I think international investors use it to trade non-US domiciled funds like UCITS that you have to call to trade. They don't actually have an account there but use Schwab Global's access to trade on foreign markets). You'd have to open a Schwab Brokerage account and a Schwab Global account, transfer, then liquidate at Schwab Global. Probably easier to tell IBKR you want to liquidate and transfer the money to a IBKR US account, or open a US IBKR account.
Topic Author
Runner3891
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Re: Interactive Brokers headache after moving to the USA

Post by Runner3891 »

typical.investor wrote: Mon Feb 03, 2025 8:43 pm Did you ask Vanguard to transfer the account (and specify to liquidate all positions)? That will have a tax consequence of course, but you want to get out of PFIC funds for sure.

I can understand IBKR restricting access since US people will complain if they aren't aware of PFIC and end up buying something that isn't good for them, but I don't understand them not responding. That's not completely unexpected from IBKR though at least in my experience.

Maybe a clear message like "I moved to the US and want to liquidate my holdings and transfer the money to a US account" which tells them what to do instead of, I would guess, asking them why or to explain what is happening which in many cases of account freezing isn't possible due the the secretive nature of investigations.

But I am not really sure what is happening here. Please post any progress you make! Thanks.
Yes, I tried to liquidate through IB and requested (through Vanguard) for a transfer. Both were denied by IB. I like your suggestion about clarifying my message to, " "I moved to the US and want to liquidate my holdings and transfer the money to a US account." Hoping I can get ahold of a human being at IB soon... Thanks for your feedback!
Topic Author
Runner3891
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Re: Interactive Brokers headache after moving to the USA

Post by Runner3891 »

AlohaJoe wrote: Mon Feb 03, 2025 9:00 pm To the OP, in the past when I've run into similar "you are in the wrong country for X" things (not with IBKR, though) I've resorted to asking a friend/family member to use their address. IBKR doesn't even ever mail anything really, so the address isn't used for anything except establishing residency. So you could re-establish (fake) residency in Vietnam, sell the positions, then change it back to the US. This forum, for good reasons, doesn't encourage discussion of illegal/unethical things so I'll just leave it there and feel free to PM me with any questions. I lived in Vietnam for a decade and set up my IBKR account while I was there. (Did you work at BIS or ISHCMC?)
I thought about that as well- re-inputting a Vietnamese address into their platform and using a VPN. However, I remember what a pain it was for my wife to "prove" her Vietnamese residency to open an IB account in 2020. It was literally a several week process where we had to send several documents to IB proving she is a resident. In fact, I had to put her on our lease because originally it was just me on it and send to IB. Luckily, my landlord was cool about it. I'm pretty sure she would have to go through that again (proving Vietnamese residency). We don't really know anyone there who we'd feel comfortable asking that favor anyway.

We lived in Hanoi and worked at UNIS.
Last edited by Runner3891 on Tue Feb 04, 2025 11:14 am, edited 1 time in total.
Topic Author
Runner3891
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Joined: Sun Mar 07, 2021 3:16 am

Re: Interactive Brokers headache after moving to the USA

Post by Runner3891 »

typical.investor wrote: Mon Feb 03, 2025 9:47 pm Probably easier to tell IBKR you want to liquidate and transfer the money to a IBKR US account, or open a US IBKR account.
Yes, we're going to try this. Thank you everyone for the feedback!
bonesly
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Re: Interactive Brokers headache after moving to the USA

Post by bonesly »

typical.investor wrote: Mon Feb 03, 2025 8:43 pm Maybe a clear message like "I moved to the US and want to liquidate my holdings and transfer the money to a US account" which tells them what to do instead of, I would guess, asking them why or to explain what is happening
I'm really not familiar with the issue, but I would second @typical.investor's suggestion of a "letter of direction," asking them to liquidate and transfer the cash to a US IBKR account (which you'll have to open first). Asking them to explain stuff isn't getting you anywhere, but giving them direction might help (as long as they think they can comply with your direction and not get themselves in trouble).
Runner3891 wrote: Mon Feb 03, 2025 11:45 am we'll be filing [US taxes] as "Married filing jointly" and I am wondering if it is best to wait until this I.B. investment headache is worked out before filing taxes?
You might want to hire a CPA familiar with the Foreign Account Tax Compliance Act to do your taxes rather than do it yourself, at least this year (and next year if this issue still lingers). It seems that a US resident owning a PFIC must file IRS Form 8621, but I didn't check if that's part of the tax filing due NLT 15-Apr or a separate declaration of foreign holdings that could be filed at any time. It might also be worth reading the PFIC topic on Investopedia (and perhaps research some other sources). If it gets complicated, you can always have your CPA file an extension of the 15-Apr due date so you have time to file accurately.
Don't do what Bogleheads tell you. Listen to what we say, consider other sources, and make your own decisions, since you have to live with the risks & rewards (not us or anyone else).
Topic Author
Runner3891
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Re: Interactive Brokers headache after moving to the USA

Post by Runner3891 »

bonesly wrote: Tue Feb 04, 2025 11:41 am You might want to hire a CPA familiar with the Foreign Account Tax Compliance Act to do your taxes rather than do it yourself, at least this year (and next year if this issue still lingers). It seems that a US resident owning a PFIC must file IRS Form 8621, but I didn't check if that's part of the tax filing due NLT 15-Apr or a separate declaration of foreign holdings that could be filed at any time. It might also be worth reading the PFIC topic on Investopedia (and perhaps research some other sources). If it gets complicated, you can always have your CPA file an extension of the 15-Apr due date so you have time to file accurately.
That's a great idea considering our complex tax situation for 2024 and 2025. I'll have to look around for a decent one that won't break the bank. Thanks for your feedback!
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